Applying the latest statistical techniques to measure operational risks lulls us into a false sense of analytic security and desensitizes management to the important qualitative aspects of controlling such exposures.
Lenders will need to, among other things, evaluate and subsequently document their compliance with ability-to-repay and fair lending rules in order to avoid getting caught in regulators crosshairs.
By smoothening the credit cycle, macroprudential regulation can temper the major problems with the growth model of the past 30-odd years: the tendency toward excessive credit growth, booms and busts.
A recent flurry of directives indicates the Basel Committee is committed to establishing uniform, international capital standards that improve the safety and soundness of large, interconnected banks.
Foreign banking organizations will need to create massive compliance and reporting systems to handle the Volcker Rule, even if the vast majority of their dealings are done outside its scope.
An explicit guarantee is better than the implicit one Fannie and Freddie had. But a more fundamental approach is to demand that financial actors internalize and capitalize the risks themselves.
